The Right Media Exchange was the first digital advertising exchange technology platform based on a bidding model structure. While the quality controls within this type of system must evolve in order to gain scale across advertisers and agencies, exchanges have provided a new marketplace for smaller publishers, networks, and advertisers.

[Regarding the importance of having at least two, large ad exchanges], the importance of choice is not limited to the ad exchange space within the display advertising ecosystem. That said, in order for at least a couple of ad exchanges to truly gain scale with marquis publishers and clients, their model must evolve with regards to targeting capabilities and quality assurance. The exchanges that recognize this, and evolve their technologies accordingly, will win in the long term. It is also highly likely that the 'winners' of the exchange market in 2 years time will have a vastly different business model and technology infrastructure than they have today.

Right Media was the first large ad exchange and they had a material impact on the media landscape. Right Media helped to bridge the gap towards transforming online advertising into a medium of high volume, low cost, ROI centric inventory. Right Media was not without its challenges of perceived low quality inventory, inappropriate content and lack of transparency. However, Right Media helped to establish financial discipline into online advertising through bidded CPM’s and delivered analytics and started the process of publisher and advertiser adoption of Ad Exchanges.

[Regarding the importance of at least two large exchanges], we believe that the landscape will most likely have 3-5 ad exchanges. Like stock exchanges, geography, niche, and competitive factors will drive this. Since the "other two" (Google and Yahoo/RightMedia) are owned by media companies and do not act as independent units, there will be a need for at least one independent exchange. From an advertiser perspective consolidation of inventory into 3-5 large pools of supply liquidity becomes important as advertisers aim to reduce duplication of inventory sources by frequency capping across campaigns and hone in on a specific profile of users, this hyper targeting requires a large base of inventory to be effective and generate material advertising spend levels.

RMX has had a few important impacts on the industry -- both positive and negative. First, they were really the innovators in the space and the first to deliver a true, scaled exchange that creates a HUGE amount of liquidity for the buying and selling of impressions. The second big impact is related to the first: the scale that was created allowed retargeting and other highly targeted audience strategies to begin to bear fruit because the scale is critical to success when reaching smaller audiences. Finally, the products and features launched by RMX to handle bidding and audience targeting are still some of the best on the market today -- RMX was a true innovator and set the standard for many of the features and capabilities that we're seeing in bidding solutions and exchanges today. On the negative side, RMX has created a perception that exchanges are low quality, and not safe for brands. While there is some truth to this in the RMX world because there were few controls in place for quality, the new exchanges are building in protections and visibility to help break this mold, and deliver much higher quality and safety for brand marketers.

The importance of having at least two viable ad exchanges is competition. With competitive dynamics, the exchanges are forced to innovate and improve, delivering better solutions to marketers, publishers and networks. Without it, you'll still have the liquidity and scale, but the features that the community demands may not be delivered (just ask RMX what happens when there's no competition), and the price-points naturally float upwards. This is largely because of the differentiation created through the competitive dynamics. Any competitive set forces differentiation, or specialization, to separate one product from the others in the market, which then allows the market players to determine where they fit the best. This allows for choice and further drives the competitive cycle to improve product capabilities and keep price-points stable. The ad exchange world needs this pressure just like all other industries.

Right Media was important in that it was the first company to demonstrate the potential of the exchange model - a common point for supply and demand aggregation to improve performance and operational efficiency for both publishers and advertisers/agencies. However, as I discussed in my recent Ad Age article, Right Media has some important limitations.

[Regarding the importance of having at least two, large ad exchanges], having many exchange players at this stage of the game is healthy. The competition between/among Google's AdX 2.0, Yahoo's Right Media and secondary players like AdBrite, Rubicon, OpenX, etc., etc., will help spur innovation to address some of today's shortcomings and move the general exchange ecosystem along faster than if one player was dominant. The industry won't need all these players as the capabilities of leading exchanges become more comprehensive in the longer term, but having at least 2 alternatives will always be important to keep the market vibrant and efficient.

Yahoo!'s $680 million purchase of Right Media in 2007 to manage its non-premium inventory helped validate the importance of exchanges in an increasingly fragmented, increasingly "real-time" media world. The fact Bill Wise and his team are now focused on building the premium and real-time bidding aspects of RightMedia - in his words being "transparent, differentiated and interoperable" - is a real shot in the arm for Yahoo! and the general exchange business. This is another validation of the changes already underway - agency demand platforms, real time bidding, guaranteed and spot markets.

[Regarding the importance of having at least two, large ad exchanges], the market needs two or three exchanges owned by the big guys (don't discount Microsoft's AdECN) and a couple independents nipping at their heels delivering the type of innovation that can come from being independent like ContextWeb. Independence means there are no channel conflict or legacy business issues which can hamper the openness and strategic orientation of the exchange. Liquidity is imperative but equally important are the levers of transparency and control as agencies and clients require this in order to shift more dollars into exchanges. Marketers want to connect with their customers in well-lit places, and they want to spread their spend across multiple players to avoid giving any one company too much control over their spend.

In addition, real time bidding is introducing interoperability, exchange aggregators and demand side platforms into the picture. This will naturally force exchanges to service the needs of brand oriented customers with premium inventory and direct response players with non-premium inventory. Customers will be looking for exchanges that can do both. Much like search, you are now seeing a variety of companies - exchange aggregators, networks, demand side platforms - grow and mature with exchanges at the core, essential to their success.

The aim of the Right Media Exchange (RMX) was to create an open ecosystem that eliminated marketplace "friction" (only had to use 2 cliches to describe). I think it accomplished that goal in a lot of ways. It got a lot of people thinking about the industry in terms of supply and demand, and allowing economic forces to dictate prices but RMX has always been constrained by the lack of true transparency and the abundance of low quality inventory.

[Regarding the importance of at least two large exchanges,] from the [ad] network standpoint, the importance isn't necessarily the number of exchanges that exist so much as it is the aggregate supply of high quality inventory that is accessible through such platforms. However, if competition between the two or more exchanges leads to greater accessibility of higher quality inventory then that is a tremendous benefit to any intermediary.

In terms of non-premium display advertising, it is rapidly becoming critical we have multiple, large and liquid inventory aggregators competing in the space. These don’t have to be traditional ad exchanges like Yahoo’s RMX or Google’s AdX although those two have done a good job of capturing the majority of market-share and advertising dollars. Publisher yield optimizers and meta-networks (networks-of-networks) can also play the role of aggregator. There are also "premium exchanges" which try to blur the boundaries but will never offer the same kind of engaging takeovers and roadblocks that a handshake-driven direct publisher relationship generates.

What then is the impact of Yahoo’s juggernaut—the Right Media Exchange—on non-premium display advertising? In the context of the where display needs to go, they are making all the right kinds of moves. Yahoo has been whispering RTB and is even letting a select few test their next generation exchange. Making 180 billion impressions per month available in real-time to the highest quality bid will have a huge impact on our industry. It has also become a premium exchange forever brushing aside the old fears of remnant inventory. And demand side platforms are being pushed out to the agency world through cores services.

RightMedia created a platform that supported a wave of ad technologies, which was fantastic.

We definitely need many exchanges right now because the industry is only beginning, and it will go through a Darwinian evolution as the exchanges with the best interfaces and lowest fees survive. Ultimately you have to expect the field to be culled due to the network effects in the exchange business.

Right Media has arguably been one of the companies that has impacted the display space in a very significant way - for two reasons. First, the obvious development that occurred around exchange-based buying and it's RTB/DSP brethren is THE story of digital display media right now. Right Media was essential in championing value-based impression buying in a dynamic environment; the buyers that learned how to extract value from their system 5 years ago are the digital practice leads developing their own DSP platforms today. Additionally, RM was first to roll out a truly transparent marketplace. The concept of direct-to-publisher transparent buying standing alongside an RTB environment, and peacefully co-existing, tells a great story about how scale, efficiency, price and brand control can be simultaneously achieved.

Regarding two liquid exchanges, this is paramount for a host of reasons. Like different stock exchanges, each marketplace will implement its' own strategy for creating maximum liquidity and the best ROAS for buyers. Different investors find different value in each exchange and thus each serves a purpose; the same is true for ad exchanges. They will aggregate different supply chains, which obviously directly impact impression/audience value. Additionally, they'll make independent choices around their own data categorization, data purchasing, optimization algorithms, etc. This means when you factor in segmentation variables, audience sources, and even other advertisers using the system, each will deliver different results.

[Regarding the impact of Right Media Exchange], over the course of roughly one month (mid-April to mid-May, 2007), there was an approximate $10 billion investment in the future of display advertising through the acquisition of Right Media, Aquantive and Doubleclick by the Big Three. Right Media certainly had impact as one of these transactions. Specific to the display ecosystem, Right Media's largest impact was arguably the opposite of what it (and Yahoo) likely intended. Rather than emerging as an alternative to ad networks in the buying process, it fueled the massive growth of me-too networks during the boom of 2006-2007. With access to Right Media's ad serving and distribution, anyone could (and many did) hang a shingle and call themselves an ad network. This, coupled with the lack of quality media on the exchange, caused the stereotypes about many networks being undifferentiated middlemen with little inventory control.

[Regarding the importance of having at least two, liquid, large scale, ad exchanges], the exchange space, for all its investment and press, is still largely unproven. Publishers who tested Right Media as a secondary inventory sales channel were largely disappointed in the impact on its RPM. Today, with the advent of newer exchange opportunities, publishers are still (and correctly) wary about the effects of placing their inventory on an exchange in a transparent manner and letting the market dictate price. On the buy-side, your typical media buyer and planner are not logging into exchange UI's and trading media all day long. The bulk of spend still goes to networks, portals and publishers. While that is bound to change (and it is, with the advent of demand-side entities at the holding company level) it's still premature to debate the importance of "how many" large scale exchanges should exist.

Right Media is a very important factor in this ecosystem. On top of being a very large exchange, Right Media offers the best ad-serving solution for ad networks available. There’s no other ad-serving solution that fits an ad network business like Right Media that you can get into as a 3rd party service. As I said earlier, I believe that ad networks will be the dominant buyers on ad exchanges and not the agencies. It’s already happening in Right Media and I think the same is happening at Google Adex. Another challenge for DSPs and exchanges is moving out from the flat CPM model into CPC / CPL / CPA. The only one that is doing this is Right Media. Others will have to adjust eventually to bring more and more buyers that are looking for performance oriented models when it comes to non-guaranteed media buy. We must have more than one exchange in order to keep a balanced market and a certain level of competition. However, I’m not sure that we will have 10 of them.